Video: How lucky can you get?

Like they say, "All you need is a dollar, and a dream." According to NASPL, it's that dream of a lottery win that made millions of Americans buy more than $60 billion worth of tickets last year. The lotteries cleared almost $18 billion in profit.

The winners get paid, and the states fill their coffers --plugging strained budgets with much-needed cash for everything from education to teacher retirement funds--- even programs to help compulsive gamblers.

Of course, there's a reason the state lotteries make so much money. The odds against winning--- especially in the big games--- are astronomical.

But most people lucky enough to beat those odds collect their prize money without any problems. But not always.

Bob Sehested of Camarillo, Calif. is a regular lottery player.

Bob Sehested: I like to play when it gets over 100 million, cause then you can dream about what you would do if you hit the 100 million, even though you don't expect to.

On Feb. 14, 2006, Bob was like millions of other Americans: Hoping for a little luck. He was playing the Mega Millions game, a lottery drawing that combines money from twelve states.

The rules are easy: Just pick the same six numbers that come up in the drawing, and you win the jackpot. But the odds doing that are, according to the New York Lotto Web site, 175,711,536 to one. 175 million to one. Still, somebody eventually wins....and that's why millions of players like Bob keep buying tickets.

One of their customers had picked 5 of the six numbers correctly--- and had won the second prize. Not the jackpot of 120 million --but still a hefty sum--- a bit more tham $530,000.The clerk knew that because the lottery computer had already told him that the second prize ticket had been sold in his store-- but no one knew who the winner was.

Still hopeful, Bob used a machine in the store to scan his tickets. You just slide the bar code under the scanner, and it tells you if you're a winner or not. Most of Bob's tickets were no good... but one ticket flashed a different message.

Bob Sehested: All it said on one of my tickets was "Congratulations. See retailer." And again, no one expects to win. Sure, you're heart races, cause you know someone won the half a million dollars.

The scanner only told him he had a winning ticket--but not how much he'd won. To find out he had to give it to the clerk who'd check it on his lottery computer. What did the clerk tell him?

It was store security video of a man buying what turned out to be that $500,000 ticket on the morning of the drawing—Feb. 14.

Bob Sehested: Now I knew the store the ticket was bought in. I clicked on the link to-- to see. You know, maybe I know the person. And I could contact 'em and-- and let them know they won.

That video could help lottery officials identify the winner-- because their computers told them the winning ticket was purchased at exactly 2:20 p.m.

And who did Bob see on that video coming into the store right at that time? His wife!

Bob Sehested: She was walking through. I said, "That's Wendy." And then, I backed up, blew up the screen. And I said, "that's me."

But if Bob was the winner, where was his $500,000?

Bob Sehested of Camarillo, Calif. had just watched himself buying what turned out to be a 500,000 winning lottery ticket at this store. Trouble is, Bob didn't have the prize money, and didn't understand what had happened. The clerk behind the counter had told him his winning ticket was only worth four dollars.

Lottery investigators came to Sehested's house and interviewed him. They quickly determined that Sehested was the legitimate winner of the $500,000 prize--- and he eventually got his money.

But why hadn't Bob known he'd had the winning ticket in the first place? After some more investigation, it became clear the clerk had stolen the winning ticket.

Here's how he did it:

Bob Sehested: When I put my ticket on the counter for him to check it, he was waiting on another customer. And he kept glancing down at my ticket. And then, when he was done with that customer, for some reason, he went into the backroom. Then, he came back. And then, he checked my ticket and told me it was four dollars.

Apparently the clerk knew he was looking at the winning numbers.

Bob Sehested: So I guess since he knew that the store had the $500,000 winner, he knew what numbers he was looking for.

And it seems he was prepared. He had another ticket handy in the back room ready to substitute just in case the big winner showed up. That substitute ticket was for a mere four dollar winner. The ultimate switcharoo.

Lottery investigators became suspicious when the clerk tried to cash the $500,000 ticket. Any large claim like that gets investigated, and the clerk's story about how he got the ticket didn't add up. The clerk pled guilty to Grand Theft, Making a False Claim to a Government Agency and Enhancements for a theft over $500,000.00. The prize offered by the stolen Mega Millions Lottery ticket was $530,858.00. The clerk was sentences to five years and four months in state prison.

Investigators arrested the clerk. He pleaded guilty to Grand Theft and making a false claim to a Government Agency. He was sentenced to more than five years in prison.

It was a happy ending for Bob Sehested. He used his winnings to buy into a tool manufacturing company. But he was shocked that the clerk he knew by name and saw every day would rip him off.

Bob Sehested: I didn't pay attention. I trusted him. And that was a mistake.

California tries to assure that what happened to Bob, doesn't happen to others, and --- like most states--- takes extra precautions to make the lottery secure and fair.

Inside Lottery headquarters in Sacramento, we were given a tour of the room where they draw those winning numbers. It's literally sealed shut. Two ID cards have to be scanned at the same time to gain entry. And then what happens-- as soon as the door opens, we have cameras that automatically come on... Audio and video cameras.

Jeff Aills is the Gaming Security Manager.

Chris Hansen: Why do you need a seal? Why not just a lock with a special key?

JeffAills: If there's a lock and key, someone could get that key, duplicate and go from there.

The Lottery's computer systems track everything from winning numbers and sales figures-- to where winning tickets are bought and redeemed. They even make sure those balls used to pick the Lotto numbers are all exactly the same.

JeffAills: Every month we do a ball-weigh and cleaning and measuring. What we do is we go to the nearest thousandth of a gram.

Chris Hansen: Thousandth of a gram?

The diameters are constantly checked. And each ball is given the equivalent of the spa treatment.

JeffAills: Wipe them off, we powder them--- make sure they're in good order--- then we tuck them into their little case and have them sealed.

JeffAills: It has to be, because if anyone thought that the integrity of the lottery was down, we could close our doors. No one would want to play our games. We want to ensure that everyone has a fair and equal chance.

And with all that security, most people hope that if you are lucky enough to beat those odds and buy that winning ticket, you're going to get your money. But the problem with lottery security isn't inside headquarters, but outside--- at the stores where tickets are bought, sold, and redeemed.

We obtained lists of top winners from ten state lotteries. We found that in many of those states--- lottery retailers, clerks and their relatives are among the biggest winners.

In Pennsylvania, a Philadelphia retailer cashed eighteen lottery tickets in three months for a total of $45,000.

In New Jersey, a retailer cashed 105 lottery tickets for more than $236,000.

In New York, another retailer has cashed 120 winning tickets for more than $500,000.

In Illinois, we found one store where four employees and five of their relatives cashed a total of 556 winning tickets, for more than $1,600,000.

In California, lottery investigators were seeing the same thing. In fact, in 2007, the five most frequent winners in California were retailers. One store owner in Los Angeles cashed 121 tickets for more than $160,000.

California lottery officials want to know why some of its retailers are cashing in big. So investigators have begun to ask questions... going undercover. This investigator is posing as a customer who doesn't know she has a winning ticket.

Can you check these for me? I don't think they're winners, but if you could just check them for me...

Will she get her money?

In California, they're serious about making sure lottery retailers are honest, and have mounted an unprecedented investigation of store owners and ticket sellers.

Bill Hertoghe is head of the lottery's Security Enforcement Division. He says if a person who sells lottery tickets is winning big--- there are just a couple of explanations.

BillHertoghe: I play a lot. Or somehow scammed it.

Hertoghe and his team of investigators wanted to find out what's going on.

BillHertoghe: There's a lot of people that are-- are-- people are winning a lot. I don't think they're playing that much. It's-- it warrants another look.

Chris Hansen: Something suspicious was going on.

BillHertoghe: Right.

So the mission now is to send undercover lottery investigators into the field. And they're going to let us observe. But before we do, you need to know a little bit more about lottery games.

No matter what state you play in, there are basically two types of games. First there're the on line games, like Powerball or Mega Millions. Called on line because it's run via the lottery's computer. Remember, that's the kind of game Bob Sehested was playing.

But for their investigation, the California lottery will be using so-called scratch off tickets.

You buy a playing card for anything from a dollar to $20. Scratch off the lucky words or numbers and you can win lots of money. As we said, you can scan your ticket and find out if you've won or lost. In some states, it even tells you how much you've won.

But in many places you need to ask the clerk behind the counter to scan the tickets for you by using the lottery computer. Here's how the undercover investigation in California will work: The investigator will enter a store wearing a hidden camera, and pretend to be an ordinary customer with a few of those scratch-offs. He'll ask the clerk behind the counter to check the tickets for him to see if any of them are winners.

Chris Hansen: Is this a realistic scenario? I mean, to come in with a ticket and say, "Hey, scan it for me. Let me know if it's a winner."

Bill Hertoghe: All the time. The majority of the public since the inception of the-- the lottery had to rely on the retailer and the clerk behind the counter.

What the clerk won't know, is that one of the tickets is a guaranteed $1000 winner. It's actually a special scratch-off ticket that the lottery investigators have manufactured just for this investigation.

The investigator will play dumb, sometimes pretending that he doesn't play the lottery, or that the tickets belong to someone else. Then he'll go off and shop in the store. There's a reason for that. It'll give the clerk a chance to be alone while she electronically scans the tickets. When she scans the winner, it will show up as a winner on the video screen and the machine will automatically print a receipt confirming it. And that will be the moment of truth.

Bill Hertoghe: And that's their opportunity to do the right thing--- represent the lottery in the proper way.

At this store in Santa Clara County, good news: These clerks do the right thing.

Because the ticket is a large win, the clerk correctly explains that in order to claim the money, he has to take the winning ticket to a district lottery office, or mail the ticket in along with a claim form.

Investigator: Oh, okay.

Clerk: And you attach it all here.

Again, this woman not only did her job, she added some solid advice.

Clerk: I do recommend sending it certified mail.

Everything is by the book. But some ticket sellers don't always play by the book. Investigators are beginning to see irregularities that could explain why some of those retailers end up cashing so many winning tickets. It's called discounting.

California lottery director Joan Borucki:

JoanBorucki: Discounting is when a retailer or a clerk will offer to buy someone's winning ticket from-- them for a reduced amount. And then the retailer or the clerk will then-- submit it as a claim for themselves.

Why would someone sell a winning ticket to a retailer for less than it's worth? Simple. They may want to hide their winnings. Let's say a person has a 1000 dollar winning ticket. Normally, they'd have to take it to the lottery to get their money. But if they owe back taxes, court fees, or child support, the state will automatically deduct it from their winnings. So... In order to avoid those payments, some people, try to strike a deal.

A retailer will sometimes offer to buy the ticket at a discount, let's say, $650 for that $1000 winning ticket. The customer gets cash in the clear---and the retailer makes a profit. But lottery officials point out, discounting hurts everyone.

JoanBorucki: And that's a loss to the state, that's a loss to the victim, that's a loss to the mother and child that's owed the back child support.

Investigator: I don't think these are winners, but could you check them for me please?

At this store in Santa Clara, California, discounting is what this retailer is suggesting when an undercover lottery investigator hands him a winning ticket to check. He does reveal that it's a winner.....

Clerk: This is too big.

Investigator: How much is it?

Clerk: Thousand.

Investigator: You're kidding!

Owner: This is too big.

But the investigator pretends it might be bothersome to claim the prize money according to the rules--- which would mean mailing the ticket, or taking it to a lottery office to cash it.

Investigator: OK, so it's a thousand... and you'll give me six-fifty for it, so I don't have to pay my back court fees? Doesn't the lottery take that stuff out of the checks? If you have like back child support, they do? OK.

She agrees, and takes the money.

Clerk: Four, Five, Six Fifty.

Investigator: Hey, thanks a lot. I appreciate it.

Later, we come back and show the owner -- Vinh Nguyen--- the undercover video.

Chris Hansen: She told authorities that she actually purchased that ticket.

Male voice: Right.

Chris Hansen: Which isn't what happened, is it?

Male voice: Actually, here we-- we done here. And I have no more comments.

As we said, though he did nothing illegal, discounting is against Lottery rules. And breaking those rules was costly to Mr. Nguyen. The lottery cancelled his contract to sell lottery tickets.

But the undercover investigators in California aren't just looking for retailers who discount. They're looking for retailers who steal. We're now in Riverside, Calif. Over the next two days, undercover investigators will visit fifty stores. Most clerks and store owners will do everything correctly.

But, watch what happens in this store. We go in with our own hidden camera and record this female investigator as she comes in. We've obscured her face because she's working undercover. At first, she goes off and pretends to shop.

Then she comes back to the counter with her tickets.

Investigator: I don't think these are winners, but if you could check them for me, please. Thanks.

Then, she goes off and shops again. Watch the clerk. You can see as he scratches off the tickets and scans them. Remember--- the lottery machine prints out a receipt and flashes on the monitor when the thousand-dollar winner is scanned.

And they kept the tickets. But were these just honest mistakes? The question now was whether any of the clerks would try to cash the prize money for themselves. Each ticket was worth a thousand dollars, which means if any of the clerks wanted to cash in, they'd have to show up at a local lottery office, or mail in a claim form. Lead investigator Bill Hertoghe was wondering how they'd explain their winnings.

Bill Hertoghe: Obviously they can't tell us how they really got it, so that will be incriminating. Our mission is to get these people in custody, get what we can on statements, further our cases, do it safely.

Two months have gone by -- and sure enough-- some of those tickets have been claimed.

We're back in Riverside, Calif., with the lottery investigators, who've already been into some of the stores and questioned the clerks who allegedly stole tickets during the undercover operation. Now we're going to get a chance to talk to them.

So we're going to USA Gas. A lottery investigator went in with a $1,000 winning ticket, asked the clerk, who's Samantha Ann Soto, to scan it - and she said there were no winners. She sent it in to claim it.

We show her this video of the investigator asking her to check what we know is a winning ticket.

Chris Hansen: So it's just a big mistake? Here's what i don't understand. If-- if it was a mistake, how come you gave the ticket to your wife? Why?

But as far as undercover lottery investigators are concerned, it's Singh and his wife who made the mistake. They're arrested, and later--- both pled guilty to misdemeanor-- Attempted Grand Theft. They were both sentenced to four months in jail, and three years probation.

Our next stop: a cigarette outlet store to talk to this clerk-- Josephine Wilwert.

She isn't there when we arrive. How do lotto investigators get her to come to the store? They call her and tell her that the prize money will be waiting for her.

Bill Hertoghe: I told her that we had her prize, it's been a while, we're here to present her with her prize and she says she was gonna work at 3 o'clock today and she'd meet us at this store.

And later in the day--- sure enough, there's Ms. Wilwert behind the counter, expecting to collect $1000.

We ask her how she got that winning ticket.

JosephineWilwert: I was cleaning the parking lot, and I found a ticket out there. I found four one-dollar ones, and then another one. So I put 'em in my purse, and I checked 'em, and one was a winner.

But investigators know that Ms. Wilwert had actually scanned the ticket when the undercover investigator handed it to her. She denies it.

JosephineWilwert: I told her, "Do you want your tickets back?" She goes, "Well, if they're not winners, throw 'em in the trash." So, that's what I did. And I tore 'em into little pieces and threw 'em in the trash. Why? What's-- what's wrong now?

What's wrong is that the undercover investigator appears to say no such thing. We show her the tape. Lottery investigators also have this video of Ms. Wilwert checking that thousand-dollar ticket at another store.

JosephineWilwert: I have no reason to freakin' lie or take anything from anybody that doesn't belong to me. I've been here almost five years. Why would I even do that?

Ms. Wilwert is just realizing there is no real prize money waiting for her.

JosephineWilwert: So, now I don't get no money because somebody…

ChrisHansen: I'm not with the lottery. I'm with Dateline NBC. Not with the lottery.

JosephineWilwert: This is bullsh*t.

Not only is she not getting any money... she is about to get what you'd have to call the booby prize.

Male voice: Miss Wilwert?

JosephineWilwert: Yes.

Male voice: I need you to come out from behind the counter.

JosephineWilwert: What, I didn't do nothing.

Ms. Wilwert later pleaded guilty to a misdemeanor--- Attempted Grand Theft, and was sentenced to three months in jail, and three years probation. As we visit more lotto retailers--we hear more imaginative stories about how winning tickets ended up in the wrong hands.

We're still on the road in Riverside, Calif.-- watching lottery investigators as they confront retailers and clerks who allegedly stole winning tickets. We're talking to them as well. So our next stop is the World Market...

He asks us to turn the camera off. We don't turn it off, but we agree to have our crew go outside the store.

Clerk: Please leave, okay? Please.

Kim tells us his version of what happened. That he checked two of the three tickets the investigator handed him--- and when he found they were not winners, he claims he threw all three in the trash.

But lottery computers have a record of him scanning the winning ticket.

He finally admits to me that he claimed the ticket himself. Saying that because the investigator didn't come back to claim it, it was now his.

Kim is arrested, and later pleaded guilty to a misdemeanor-- Attempted Grand Theft. He was sentenced to six months in jail, and three years probation.

We're now heading over to the El Rancho market and this is an interesting one because it appears as though the owner's wife is the one who actually ripped the ticket.

Chris Hansen: And how are you?

Owner's wife: Fine.

Chris Hansen: I'm Chris Hansen, I'm with Dateline NBC. How are you? And we're doing a story on the lottery. And we're trying to figure out how a winning ticket was presented here. But the woman who presented it, was told it was not a winning ticket.

Kahn tells me she finally realized it was a winner --but too late to notify anyone. She also tells me she scanned the ticket only once.

Chris Hansen: Okay. Well, there's a couple problems with that story.

Owner's wife: What?

Chris Hansen: Well, one of the problems is that we know that the ticket was scanned twice here at the store. It was checked at 9:44, which is about the time the lottery investigator was here and then it was checked again at about 9 minutes after 1 o'clock in the afternoon. Now we know that for a fact so somebody rechecked that ticket to make sure it was a winner. Who did that?

Owner's wife: I--I-- I don't know. I don't-- I checked only one time.

Chris Hansen: You only checked it one time. So did it just magically get up and walk over to the machine and check itself? How does that happen?

Chris Hansen: Your daughter. What did you tell your daughter about the ticket?

Owner's wife: I said some customer left it.

But her daughter apparently has a different version of events.

Chris Hansen: Well, know you the problem here, Mrs. Kahn, is that you're daughter says that she bought the ticket, she put in her purse, forgot about it, and finally saw it and decided it was time to cash it in. Now, that is a completely different story from the one you just told me.

Owner's wife: No--

Chris Hansen: Yeah, it is.

Owner's wife: This is a mistake. I told you. I don't need money and that's why I keep the ticket and check it-- nothing.

Her husband and co-owner of the store arrives and tells us he thought his daughter really did buy the ticket at their store.

Chris Hansen: You knew nothing about this. What do you say to your wife about this? What did you say to your wife about this?

And it's all about to get worse for the Kahns. Because he and his wife are the owners of the store-- and the licensed lottery retailers... the lottery is going to terminate their contract to sell lottery tickets... and remove all the lottery equipment from this store, and--- another one they own. Stores like this count on lottery sales to stay afloat.

Chris Hansen: What is that going to do to you the fact that you are no longer a lottery retailer?

Owner: Mostly we sell the lottery. That's people come in the store, they buy the other stuff. You know. We lose the business.

No lottery, no business.

Mr. Kahn's wife and daughter are arrested and later pleaded guilty to a misdemeanor: Attempted Grand Theft. The Kahn's daughter also pleaded to another misdemeanor: Receiving Stolen Property. Both of them were sentenced to four months in jail and three years probation.

To date, the California lottery has investigated more than 500 stores throughout California. The clerk or retailer kept the tickets and tried to correct per Hertoghe cash them in 59 times, resulting in prosecutions every time. At another thirty stores, the lottery clerk kept the winner, but didn't cash in the ticket.

RodPacheco: It's a-- it's a violation of public trust.

District Attorney Rod Pacheco's office prosecuted the cases in Riverside.

Chris Hansen: Were you surprised that this kind of a crime was taking place?

RodPacheco: Yeah, I-- (laughs) was kinda shocked about it. And I was-- shocked in the sense that I don't know why I didn't think that people would do such a thing. But, it made perfect sense when i thought about it.

Five top retailers averaged 150 claims total. They now average four claims a year. And California's investigation seems to be having an impact. Three of the retailers who were cashing the most winning tickets haven't cashed a single ticket since the investigations started eighteen months ago.

So--- how common are discounting and theft in other state lotteries? There's no way to know, because few states have investigative arms like the one we saw in California. But as we told you, retailers are turning up as frequent winners in other states--- New York, Illinois, New Jersey, Pennsylvania, Ohio, and Tennessee--- just to name a few.

Here in New York, the lottery sold more than $7 billion in tickets last year. It's the largest lottery in the country. We asked the New York lottery if it would allow us to conduct an investigation similar to California's. It declined. So we tried to see for ourselves, whether retailers in New York would tell us if we had a winning ticket.

The New York Lottery claimed that our efforts to obtain winning tickets to use in our investigation was illegal--- and put out this alert--- spit out at every lottery terminal in the New York City area.

Of course, that is not what we were trying to do. We were going to see if clerks in New York would be honest.

The New York lottery declined our request for an interview, but Gordon Medinica, the director of the New York lottery asked that this e-mail be circulated to every lottery director in North America. He asked if Dateline had contacted them, if they'd granted us an interview... he even wanted to know if we had an attitude.

"How would you describe their tone towards the lottery industry?" He asks.

He goes on to say our story is about "...entrapping retailers into scamming customers our of lottery prizes."

Meanwhile, a few other states are following California's lead and are either planning of have started undercover buying operations of their own.

This video is from an undercover operation in Minnesota. In this case, the retailer did the right thing.

And again--it should be noted that the vast majority of retailers are honest--and if you win, it's likely you're going to collect your prize. But what can you do to make sure that if you have a winning lottery ticket... you get your money?

Joan Borucki: One of the most important things that the consumer can do when they get their tickets is sign 'em. Even before you play the ticket, sign the ticket.

Then, make sure you know the rules of the game you're playing, and what makes a ticket a winner. Check your state lottery's website for information and odds.
Video: Lotto clerk denies everything

And while you're there, you can check the winning numbers as well. Most lotteries post the numbers on the Web site.

Many states now have those ticket-checking machines in stores that players can use to see if they're winners, and some even tell you how much you've won.

Joan Borucki: Quite honestly, if the customer doesn't believe that the game is fair and that they're going to be treated fairly, and that the integrity is there in the system, I'm not gonna be able to sell that ticket.

And if you do ask the lottery clerk to check the tickets, make sure you ask for a receipt for any winning ticket.

But Borucki wants to make sure even though the odds are long, that they be the same for everyone who plays.

Joan Borucki: I wanna make sure that everybody knows that the lottery has the highest integrity. And we also want our retailers and our clerks to know that's very important to us. We're gonna be watching.

Dateline wires the home of a volunteer, Jenny, from top to bottom with hidden cameras. Then she called repairmen to her house for a simple problem we created as a test with Jenny's pool. NBC's Chris Hansen reports.